A Retirement Solution For Under-Saved Americans


For quite a few years I have been writing about tiny houses in the context of alternative retirement lifestyles. I touched on it very briefly in the introductory post here in the retirement section of my page on the maven.

Tiny houses gained awareness during the financial crisis as more and more people began to question the financial merit of the American dream of traditional homeownership and the mortgage that goes with it. Tiny houses typically look like houses (for the most part) but are small enough to fit on a trailer and be mobile. This would allow the owner to hit the road, live something of a nomadic lifestyle if they wanted and working in the gig economy as opposed to the typical 9-5 crunch. This especially resonated with millennials early on in the “movement” as they felt their job prospects were diminished by the crisis.

Tiny houses are of course very small, rarely exceeding 220 square feet and not surprisingly can be very inexpensive. But they aren’t
always that inexpensive is you watch any of the shows on HGTV or look on sites like Tiny House Listings where you can easily find tiny houses for sale for well over $300 per square foot.

The alternative retirement idea is straightforwardly downsizing from more of a traditional home into a tiny house or more broadly speaking some sort of very small house. Where many Americans are under saved for retirement but have something accumulated, they hopefully have a house that is paid off at retirement. The St Louis Fed reports that the median home price is $315,000 (seems high).

Someone who applies themselves timewise can find some sort of tiny/small/container home for $30,000-$40,000, add $25,000 for some land, $20,000 for a well, $20,000 for utilities and $10,000 for a septic system and maybe it costs $115,000 all in if things don’t go well with utilities and the well. This would leave $200,000 left over. A married couple of dual earners could have $150,000-$200,000 in 401ks or other retirement plans. The downsize as laid out just about doubles what I would argue would be a reasonable 401k balance for under saved as opposed to no savings.

The tiny house/small house movement has grown to include container houses, as touched on above, as in shipping containers which are usually 40’x8’ or 20’x8’ can be used individually or builders can combine multiple containers to build a house. The other night we watched several episodes of Containables, a show on the DIY Network about a young couple whose business is building container houses. Cost-wise, hiring builders like them is going full boat on the expense with the range of the three episodes we saw started at $50,000 all the way up to $100,000 but it could have been much more if some of the expenses I mentioned above were pertinent to those situations and all three houses had concrete slabs poured which is not cheap.

While I like the aesthetic appeal of containers being very industrial looking, they might be more durable than the typical tiny house
(pretty much a trailer) which is a depreciating asset as opposed to just a very small traditional home.

If any of this interest you whether it is intriguing on its face or as a matter of financial need, with a little bit of work including sweat equity, patience and ingenuity you can find used tiny houses and can do some of the labor yourself. If bringing electricity to a property is onerous you can go solar with used equipment. Depending on the cost for a well, if needed, a 2500-gallon tank and water delivery could be more practical, all the more so if water catchment is part of the mix.

I repeat several quotes over and over in my posts, one of them from Joe Moglia who after being the CEO at TD Ameritrade moved on to be the football coach at Coastal Carolina who said “no one will care more about your retirement than you.” That applies here in terms of putting in the legwork to take a potentially retirement enhancing idea like this and cut the cost down from a theoretical $115,000 from above down to maybe $85,000, the $30,000 savedwould be a meaningful bump for that portfolio.

Obviously this idea cannot work for everyone, probably very few people but exploring something like this might help people find a solution that can work for them.